What is car finance? – PCP and HP

May 24, 2021 | The Hub | 0 comments

If you are looking at car finance and wondering about the different types, this post is for you. We will be comparing personal contract purchase and hire purchase, so read on to find out more.

Before we get stuck in, there are different types of finance and different lends, so make sure you do your research, speak to experts and find a deal that works for you.

Personal contract purchase

Often shortened to PCP, this is a austere popular type of car finance. You typically pay a deposit at the start of the agreement, and the remainder of the balance is spread out over a number of months, with an agreement and plan in place. At the end of the agreement, there will usually be a few options to choose from. You will either hand the car back to the finance company, use it as a deposit on your next agreement, or pay a balloon payment in order to own the car. A balloon payment is usually a large sum of money due at the end of the agreement if you want to own the car as your own.

Hire Purchase

Hire purchase is often referred to as HP, and it is largely the same as a personal contract purchase agreement. It is the same in the sense that you pay a deposit and the balance is split over an agreed number of months. However, at the end of the agreement you own the vehicle. This means that the monthly payments are often little more expensive than with PCP, and with HP, there is still sometimes an option to purchase fee at the end, but this is usually the equivalent of a monthly payment.

It is important to know that finance is not right for everyone and that you should carefully consider whether or not it is right for you. If you would like some help and guidance to find car finance in London, get in touch with us at LMC.